FM Nirmala Sitharaman Addresses GST Concerns on Health & Life Insurance Amid Protests

Sitharaman emphasized that taxes on medical insurance existed before the GST implementation.

Finance Minister Nirmala Sitharaman responded to the Opposition's demand to abolish the Goods and Services Tax (GST) on health and life insurance, highlighting that a significant portion of the collected revenue benefits the states.

Speaking in the Lok Sabha on Wednesday, Sitharaman noted that nearly three-quarters of the GST revenue goes to the states. She urged those protesting to discuss the issue with their respective state finance ministers.

Sitharaman emphasized that taxes on medical insurance existed before the GST implementation.

"Tax has been there on medical insurance even before the introduction of GST. This is not a new issue; it was already there in all the states. Those protesting here... did they discuss regarding the removal of this tax in their states?" she questioned.

GST Council & Revenue Sharing

Addressing the role of the GST Council, the Finance Minister pointed out that states hold a two-thirds representation in the council, while the Center has a one-third representation.

This council is responsible for determining GST rates and policies. She highlighted that 73-74% of the GST on life and medical insurance collected last year, amounting to INR 12,264 Cr, went to the states.

The current GST rate on these insurance products is 18%, divided equally between the Center and the states. Furthermore, 41% of the central GST is transferred to the states in accordance with the Finance Commission's devolution formula.

Before the implementation of GST in July 2017, the government levied a 15% service tax on these products. The GST Council, comprising representatives from the states and the Union Finance Ministry, later fixed the rate at 18%.

Opposition Stance

The Finance Ministry maintains that GST rates and policies are a shared responsibility between the Center and the states, as the GST Council serves as the decisive authority.

Despite this, Opposition-ruled states have sought to blame the Center for policies or rates they find unfavorable, according to officials.

Interestingly, the push to eliminate GST on health and life insurance originated from Transport Minister Nitin Gadkari. He advocated on behalf of the Life Insurance Corporation (LIC) employee union from Nagpur, showcasing the internal government dynamics and differing perspectives within the ruling party.